Economic Analysis Propane to Acrylic Acid design plant proses

115 the IRR remains above 40, still suggesting that the project is worth further consideration. It should be noted that the sensitivity analysis does not take into account the relationship between the price and sales of acrylic acid. In a real market, if the price of acrylic acid were to increase to 2.75, sales would likely fall as customers search for alternative products. The actual IRR curve would likely not be as steep as that shown in Figure 10.1, page 114. Bivariate sensitivity analyses were also conducted to determine which coincident parameters showed the greatest risk for a loss in profitability. In Tables 10.2-4 is evident that if the price of acrylic acid falls to 50 of its estimated value, the fixed costs andor variable costs would have to fall significantly in order to maintain profitability. This could be a problem in a scenario where the production of acrylic acid from propane becomes extremely widespread. The cost of propane and thus the variable costs would rise due to demand and the prices of acrylic acid would fall. Steps must be taken to ensure the process remains profitable by optimizing the process as much as possible and protecting its details as trade secrets in order to maintain a competitive advantage. Although the expected IRR on the proposed process is approximately 85, the return is highly sensitive to product price. The quoted selling price of acrylic acid used for the process was 1.75lb. However, the estimated price for 2012 was listed as 1.20lb which would bring the IRR down to approximately 45. 23 The estimated price for 2013 was 1.12-1.16lb which corresponds to an IRR of 35. 24 The high volatility in acrylic acid price explains why the return calculated is questionably high. It is suggested that a price of acrylic acid of 1.15lb would produce a more reasonable estimate of the IRR. 23 Guzman, D. d. 2012. First 2012 post: OPXBio update. http:www.icis.comblogsgreen-chemicals201201first- 2012-post-opxbio-update.html 24 Terry, L. 2013. Arkema adds to U.S. March acrylates price-hike efforts. 116 Table 10.2: Fixed Costs vs. Product Price Fixed Costs 11,562,362 13,874,835 16,187,307 18,499,779 20,812,252 23,124,724 25,437,197 27,749,669 30,062,142 32,374,614 34,687,086 P rodu ct P ri ce 0.88 Negative IRR Negative IRR Negative IRR Negative IRR Negative IRR Negative IRR Negative IRR Negative IRR Negative IRR Negative IRR Negative IRR 1.05 37.15 35.13 33.04 30.87 28.59 26.16 23.53 20.59 17.12 12.48 Negative IRR 1.23 53.68 52.02 50.35 48.66 46.95 45.23 43.48 41.70 39.89 38.04 36.15 1.40 67.65 66.12 64.59 63.05 61.51 59.96 58.41 56.85 55.28 53.71 52.12 1.58 80.28 78.81 77.35 75.89 74.43 72.97 71.50 70.04 68.57 67.10 65.63

1.75 91.99

90.57 89.15 87.74 86.33 84.92 83.51 82.10 80.69 79.28 77.87 1.93 103.00 101.62 100.24 98.86 97.48 96.11 94.73 93.36 91.99 90.62 89.25 2.10 113.46 112.10 110.75 109.40 108.05 106.70 105.35 104.01 102.67 101.33 99.99 2.28 123.44 122.10 120.77 119.44 118.12 116.79 115.47 114.15 112.83 111.51 110.20 2.45 133.00 131.69 130.38 129.07 127.76 126.46 125.15 123.85 122.55 121.26 119.96 2.63 142.19 140.90 139.61 138.32 137.03 135.74 134.45 133.17 131.89 130.61 129.33 Table 10.3: Variable Costs vs. Product Price Variable Costs 55,852,558 67,023,069 78,193,581 89,364,092 100,534,604 111,705,115 122,875,627 134,046,138 145,216,650 156,387,161 167,557,673 P rodu ct P ri ce 0.88 43.51 37.09 29.76 20.36 Negative IRR Negative IRR Negative IRR Negative IRR Negative IRR Negative IRR Negative IRR 1.05 58.42 53.04 47.36 41.24 34.41 26.16 12.48 Negative IRR Negative IRR Negative IRR Negative IRR 1.23 71.68 66.80 61.78 56.55 51.07 45.23 38.81 31.37 21.32 Negative IRR Negative IRR 1.40 83.90 79.34 74.69 69.93 65.03 59.96 54.66 49.06 42.99 36.15 27.72 1.58 95.36 91.03 86.63 82.17 77.62 72.97 68.19 63.26 58.13 52.73 46.96

1.75 106.20

102.05 97.85 93.60 89.29 84.92 80.46 75.91 71.25 66.45 61.47 1.93 116.54 112.54 108.49 104.41 100.28 96.11 91.88 87.59 83.22 78.77 74.21 2.10 126.44 122.55 118.64 114.69 110.71 106.70 102.64 98.54 94.39 90.18 85.90 2.28 135.95 132.17 128.36 124.53 120.68 116.79 112.88 108.93 104.94 100.91 96.83 2.45 145.10 141.41 137.70 133.98 130.23 126.46 122.66 118.83 114.98 111.09 107.17 2.63 153.94 150.33 146.71 143.07 139.41 135.74 132.05 128.33 124.59 120.82 117.03 117 Table 10.4: Total Permanent Investment vs. Product Price Total Permanent Investment 37,937,020 45,524,424 53,111,828 60,699,232 68,286,636 75,874,040 83,461,444 91,048,848 98,636,252 106,223,656 113,811,059 P rodu ct P ri ce 0.88 33.24 Negative IRR Negative IRR Negative IRR Negative IRR Negative IRR Negative IRR Negative IRR Negative IRR Negative IRR Negative IRR 1.05 82.55 65.75 52.57 42.03 33.41 26.16 19.89 14.29 9.07 3.86 Negative IRR 1.23 116.20 94.49 77.64 64.40 53.83 45.23 38.11 32.14 27.04 22.63 18.77 1.40 145.19 119.12 98.84 82.91 70.22 59.96 51.54 44.53 38.61 33.55 29.18 1.58 171.12 141.29 117.91 99.50 84.82 72.97 63.25 55.18 48.39 42.62 37.65

1.75 194.69

161.61 135.48 114.81 98.28 84.92 73.96 64.87 57.24 50.75 45.19 1.93 216.30 180.43 151.86 129.12 110.89 96.11 83.98 73.91 65.46 58.29 52.14 2.10 236.24 197.98 167.24 142.63 122.81 106.70 93.46 82.46 73.23 65.39 58.67 2.28 254.71 214.42 181.75 155.43 134.14 116.79 102.51 90.62 80.63 72.15 64.88 2.45 271.90 229.87 195.49 167.62 144.97 126.46 111.18 98.45 87.73 78.64 70.84 2.63 287.94 244.43 208.54 179.25 155.35 135.74 119.52 105.98 94.58 84.89 76.58